The United States is a relatively young country. In 1776, when the American colonies became the United States of America, it had a small independent farming economy. Now the United States makes up about 20 percent of the world economy, mainly because of its large and integrated market system, rich resources, a legal system that encourages the economy’s growth, and the common entrepreneurial drive.
In 1787, the adoption of the U.S. Constitution effected the unification of the market system of the whole United States. The lack of internal tariffs or interstate commerce tax resulted in much more profitable business. Economic growth was driven also by inventions and a great interest in investing resulting in new industries, such as the cotton industry, which boomed in the Southern states after the cotton gin was invented in 1793. The effect of the development of railroads was even more significant. It open new territory to further development. A major national railroad system was developed, which became essential in the industrialization of the United States.
The result of the American Civil War (1861-1865) determined the course of the country’s economic system, particularly because of the abolition of slavery. The modern industrial economy of the country came from this event. Mass production methods, particularly as introduced by Henry Ford, also drove the rapid development of industry. Ford’s generous wage to his workers enabled them to buy the cars that they made, resulting in the rapid expansion of the industry.
In 1929, the Wall Street Crash resulted in the Great Depression. The Depression severely affected the U.S. Economy, especially those sectors based on heavy industry. Prices for crops fell by half. The standard of living was very low at this time, and the tendency of the population to save more and spend less perpetuated the economic recession. Its effects lasted until the 1940’s.
In the 1990’s, the country’s debt increased by 75 percent. GDP increased by 69 percent and the stock market grew more than 300 percent. From 1994 to 2000 the economy’s output increased, unemployment dropped to less that 5 percent, and the stock market grew massively.